Q:

Subject: When is my AIG NOT really AIG?

 

I  have tried to do a section 179 on my business expenses for 2006. It seems as thought I cant exceed the 22k that was reported on my W-2's even though the IRS is saying my early withdrawal of IRA funds is being reported, taxed, and penalized as 2006 income. My total income was about 67K but i cant go higfher in my business losses than the 22k reported on my W-2? Something doesnt seem right here. The IRS is counting my 1099 income as income only when it is beneficial to them? Why wont they count it as income for my business losses?

 

  Thanks in advance,

A:

The rules are very clear. The kind of income that qualifies as an offset to Section 179 is "earned" income, which is the kind that is subject to Social Security taxes.  IRA withdrawals are not subject to SS tax, and thus do not count, even though they are subject to normal income taxes.  The same thing applies to all other kinds of unearned income, including pensions and investments (interest, dividends and non-business capital gains).

You should be working with a professional tax advisor before making any of these kinds of moves so that you aren't surprised by the consequences.

Good luck.

Kerry Kerstetter

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/10/2006 12:59:00 PM Send this post: